If you look at any currency charts you will see long term trends that last for months or even years and these can be worth $10 - 20,000 or more.

Many traders pick the direction correctly get stopped out and then see the trend make huge profits and there not in!

So how do you catch and hold these trends? Let’s take a look.

Entering the trend

You see an important level of resistance about to be broken and you want to get in so you buy a break and prices accelerate – Now you’re in profit and looking forward to a much bigger one.

Now it is here that most traders fail to act correctly to hold the trend and it is routed deep in human nature.

Human emotions and trend following

You have a profit and the bigger it gets, the more the temptation is to take it before it gets away.

Most traders know this is wrong they need to hang on to capture a bigger profit but they want to limit risk.

So what do they do?

The Fatal Mistake

They make the fatal error of trailing their stops up quickly and most do it under the first level of resistance - after the trend has broken to the upside.

If you want to catch the big trends you cannot do this as you will simply get stopped out.

90% of traders lose money in forex trend following and this is due to the fact they try to restrict risk so much they never make any meaningful profits.

By trying to restrict risk they actually create it.

In the brutal world of currency trading volatility is the enemy unless you handle it correctly and even in the best trends you will see huge swings within the trend.

Trail your stop to close and volatility will take you out.

Risk

If you want to catch big trends you have to take a calculated risk.

This means holding your original stop and letting the trend go WITHOUT trailing your stop to close.

Sure, you are going to see periods where dips eat into your open equity by thousands of dollars, but if you believe you are in a big trend, you need to leave the market room to breathe.

If you don’t do this, you will NEVER hold the really big trends that can pile up huge profits.

Get used to taking dips in open equity when forex trend following and keep your eye on the bigger picture.

Forex trend following over several weeks or months holding a big trending move is mentally tough, but do it and you will catch some stunning profits.

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By Sacha Tarkovsky

The best way to forecast forex markets is to look at the markets' internal structure.

The U.S. dollar rallied strongly against the euro in intraday trading today (August 14), pushing the exchange rate down to $1.4780 – the level it hasn't seen since February. What's behind such a persistent show of strength on the dollar's part?

As usual, it depends on whom you ask. The mainstream media forex analysts blamed the August 14 EURUSD decline on the fact that "crude oil fell and a report showed Europe's economy contracted for the first time since the 15-nation currency was introduced almost a decade ago." (Bloomberg)

If that's true, that means that in order to catch Thursday's drop in the EURUSD, you needed to know ahead of time what oil was going to do that day, and also what that European report was going to say. So, instead of trying to predict one market – the EURUSD – you now have to watch, and correctly forecast, three.

And even then you weren't guaranteed success. The dollar could have easily lost on Thursday, after the news. Can you imagine a headline saying, "Falling oil prices send the U.S. dollar down, indicating slowing U.S. consumer demand and continued economic weakness"? And, "The U.S. dollar slides as a key European report indicates the EU's economy is still growing faster that the U.S."?

That's the beauty of fundamentally-based explanations: You can spin them any way you want, using the same factors to justify both the market's rallies and declines.

But there is a way to simplify your forecasting process. In Jack D. Schwager's excellent “Market Wizards,” one famous trader summarized his success this way: “Listen to the market, it will tell you everything you need to know.” In other words, don’t let the economic data confuse you. Watch market sentiment; track momentum; look for repeating patterns in the charts, etc.

That's exactly the process Elliott Wave International's Jim Martens, the firm's Senior Currency Strategist and editor of Currency Specialty Service, used when he posted this intraday forecast for subscribers on the morning of Thursday, August 14 – about an hour before the EURUSD began to fall in earnest:
By Vadim Pokhlebkin
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24 hours a day, EWI's Currency Specialty Service brings you forecasts of all major forex markets. Details.